Guide
How Does Van Leasing Work?
If you are looking to drive a new van, but would prefer not to purchase it outright, leasing might be the perfect solution for you. Find out more in this handy article.
Words by: Tom Roberts
Published on 8 February 2024 | 0 min read
If you are looking to drive a new van, but would prefer not to purchase it outright, leasing might be the perfect solution for you.
Van leasing is a straightforward arrangement where you pay a monthly fee to drive a brand-new van. It is like renting, but typically runs for an extended period – usually between 2-5 years. The leasing process involves paying an initial rental payment at the beginning of the contract, followed by monthly rental payments throughout the lease term, and ends with the return of the van.
Van leasing is a straightforward arrangement where you pay a monthly fee to drive a brand-new van. It is like renting, but typically runs for an extended period – usually between 2-5 years. The leasing process involves paying an initial rental payment at the beginning of the contract, followed by monthly rental payments throughout the lease term, and ends with the return of the van.
What Are The Advantages Of Leasing?
Leasing sounds simple enough, but let us take a closer look at some of the key advantages of van leasing:
- Fixed Monthly Payments: Van leasing is built around driving a new vehicle for fixed monthly payments. Once your lease is completely locked in at the start, the monthly price will not change allowing you to manage your monthly outgoings. You are completely in control of your payments.
- Avoid Depreciation: Like most new vehicles, vans will depreciate over time. When you lease one, however, you will not end up having to sell a used van once you are done with it. Instead, you return it at the end of your contract and (if you like) choose a brand-new van to start a new lease on.
- Maintenance Packages: When you choose to lease a van, you can add a maintenance package to your monthly payments – these often cover expenses such as tyre replacements, servicing, and routine maintenance throughout your lease. Terms and conditions always apply, so if you do add a maintenance package to your lease make sure it covers what you need it to.
- Additional Cost Savings: Like other vehicles, for the first three years of its life your brand-new van will not require an MOT. Road tax is already included in the monthly payment you agree at the start of the lease and, if your business is VAT registered, you can reclaim all VAT paid on a commercial vehicle.
How Does Van Leasing Work?
Now you have seen some of the key advantages of van leasing, let us delve into the step-by-step process:
- 1. Choose Your Van: The first step is to select the van that best suits your business needs. Auto Trader offers a wide range of the latest vans to ensure your business looks and operates at its best.
- 2. Choose Your Lease: Next, you will decide on the type of lease, the duration (typically 2, 3 or 5 years), and estimate your expected annual mileage during the lease term.
- 3. Provide Your Financial Details: We (and other leasing companies) will require some financial details from you to secure credit from one of our finance partners. A standard credit check will be conducted to ensure that you can comfortably manage the monthly payments. You can specify your initial payment amount, and we will collect a holding deposit to secure your new van.
- 4. Van Delivery: Once all the paperwork is signed and in order, your van will be delivered direct to your doorstep or any other location you choose.
- 5. Enjoy Your Van: After the delivery, you can enjoy your brand-new van for the duration of your lease contract.
- 6. Return Your Leased Van: At the end of the lease, the van will be collected by the finance company who helped set up the lease. A few months before this, you should be contacted to see if you would like to set up a new lease on a new van and beginning the process again. Some people arrange for a new leased van to be delivered the day their previous van is collected, resulting in a seamless switch over.
What Lease Contract Type Is Available?
Let us explore the lease contract type available:
Van Contract Hire
This is the most popular lease contract type, offering hassle-free van leasing with the advantage of returning the van at the end of your lease. It typically involves lower initial payments, affordable monthly instalments, and no concerns about depreciation.
How Is The Monthly Lease Payment Worked Out?
To determine how much your fixed monthly payments will be, several factors come into play:
- Total Cost of the Vehicle: The van's total cost or retail price directly affects your monthly lease rental payments. Lower-priced vans often result in lower initial rental and monthly payments.
- Interest Rates: Your van lease involves a credit arrangement with a funder, and the deals offered will depend on the interest rates available at the time.
- Residual Value: The van's estimated worth at the end of your lease term is a significant factor in calculating your monthly payments. Numerous variables influence this estimate including the lender's experience, the van model's availability, and how likely it is to be a van that will sell once used.
- Initial Rental: At the start of the lease, you will make an initial rental payment. The size of this initial rental, along with the lease’s duration, will affect your monthly payments. The amount you choose to pay upfront is customisable based on your financial capacity, typically meaning that paying more upfront will result in lower monthly rental payments.
Benefits of Leasing Vans For Businesses In The UK
Pros:
- Preservation Of Capital: Leasing allows businesses to keep capital in the business as there is no significant upfront purchase cost, enabling them to spend the money on other things the business needs.
- Predictable Expenses: Fixed monthly lease payments make budgeting easier, helping businesses maintain financial stability and plan for the long term.
- Tax Benefits: Leasing often provides tax advantages, with lease payments being tax-deductible as a business expense. Small businesses can therefore benefit from reduced taxable profits.
- Access to Newer Models: Leasing allows businesses to regularly upgrade to newer, more fuel-efficient, and technologically advanced vans, ensuring they stay competitive and environmentally responsible.
- Maintenance And Warranty Coverage: Many leasing agreements include maintenance packages, and new vehicles come with manufacturer warranty coverage, reducing the burden of repair costs and downtime.
- Flexibility: Leasing offers flexibility in terms of lease duration and mileage allowances, allowing businesses to tailor agreements to their specific needs.
- Reduced Depreciation Risk: With leasing, businesses do not have to worry about the van's resale value or depreciation, as they simply return it at the end of the lease term.
Cons:
- No Ownership: Leasing means you will not own the van at the end of the lease. For businesses looking to build equity or asset value, buying may be a more suitable option.
- Long-term Cost: Over a longer term, leasing can be more expensive than purchasing a van outright, as you continue to make payments without gaining ownership.
- Mileage Restrictions: Lease agreements come with mileage limitations, and exceeding these limits can result in additional fees.
- Wear And Tear Charges: Excessive wear and tear on the leased van can lead to additional charges at the end of the lease term.
- Commitment: Leasing typically involves a commitment to the lease term, and exiting the agreement early may incur penalties.
- Customisation Limitations: Leasing agreements may restrict the extent to which you can customise or modify the van to meet specific business needs.
It is essential for businesses to carefully assess their unique circumstances and objectives before deciding whether leasing or buying a van is the best choice. While leasing offers many benefits, including tax advantages for small businesses, it may not be suitable for everyone, and the decision should align with the business's financial and operational goals.
Leasing FAQs
How Much Does It Cost to Lease a Van?
The cost of leasing a van varies depending on the specific van model you choose. You will find there are a range of leasing deals available on many different types of vans at a range of prices.
Are All Leased Vans New?
At Auto Trader Leasing, we offer brand-new vans on our leases. While you could lease a used van elsewhere, our new van leasing options are often more cost-effective and provide better value.
How Long Does Delivery Take?
The delivery time for your van depends on factors such as the selected vehicle, its availability, and any additional accessories you may choose. If your chosen van is in stock and readily available, delivery can take as little as 14-21 days.
What Is a Pre-Reg Van?
A pre-reg van is a brand-new van that has already been registered with a DVLA license plate. Depending on how long the van has been registered, it may offer an opportunity for a more cost-effective lease deal.
Are Tax And Insurance Included In Your Van Lease Contract?
VED Tax, also known as road tax, is included as part of your monthly payments. However, insurance is not included, and you will have to source it yourself.
Would You Like To Know More?
If you want to learn more, check out our ‘Van Leasing Explained’ articles that are filled with in-depth information on how it all works, or if you are ready to lease today have a look at the latest van leasing deals.